Government to address staggering scale of uncollected debt

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

16 October 2012
CAB 110-12
New laws enabling government departments to share information on people and businesses that owe them money will …

16 October 2012
CAB 110-12

New laws enabling government departments to share information on people and businesses that owe them money will be introduced, Francis Maude, Minister for the Cabinet Office, announced today. In February, the Cabinet Office’s Fraud, Error and Debt Taskforce, published the first ever review of debt owed to central government which found that over £20 billion was owed to government and that more than £7billion was lost through unpaid debt being written off each year - that’s equivalent to over £400 per working household every single year.

The plan to legislate comes after a study revealed that debtors owed money to multiple departments. The new law will make it easier for departments to share appropriate and proportionate information, allowing them to understand debtors’ circumstances so that more effective and intelligent action can be taken to recover money and reduce losses. Debtors who try to beat the system will find it much harder while those in genuine hardship will get the support they need to clear their debt.

Other new announcements include:

Measures to include, for the first time, data on each department’s uncollected debt in the Quarterly Data Summaries which are published online so everyone can scrutinise Government’s work to address this.

New high level guidance will be adopted by the major debt departments to ensure a fairer approach to those who have fallen into debt but cannot afford to pay it back. This is intended to situations like those where one single mother was chased by 22 different parts of Government.

It is a priority to ensure that every civil servant who has any contact with debtors, is trained and supported to apply best practice. Across central government, there is now an externally accredited qualification in debt management which will both up-skill staff and recognise existing expertise.

Commenting, Francis Maude, Minister for the Cabinet Office, said:

My Department has found that over £7billion is lost through uncollected debt being written off every year - that’s a staggering £400 per working household. And Government as a whole is owed £20 billion - enough to pay for the Olympic Games twice over.

For years government has done all too little to collect the huge amounts of debt which it’s owed. That’s just totally unfair to the hard-working honest people who are paying their taxes and doing the right thing.

Government holds the data to trace debtors and assess their ability to pay but too often we can’t use it. That’s why we will act to enable data sharing to catch the cheats, while also understanding who is in real hardship and needs more time or support to pay.

Because many debtors owe money to multiple departments, I am working closely with other Ministers to find ways of aggregating these debts so we recover them in a single action - that would be simpler for government and the debtor. We have already introduced standard guidelines on assessing a person’s ability to pay and will continue to develop a proper, consistent approach.

Although some data sharing between government departments is already allowed there are at least eighty different legal ways to access different bits of data, each with different restrictions. The new legislation will create a single legal process for all the appropriate information to be shared in each case. A clearer process will also allow better security so we can be assured that the right person gets the right information and nothing more. A consultation on proposals for legislation will be opened next year. This will be one of a series of measures to tackle debt owed to government.

The Cabinet Office’s Efficiency and Reform Group worked with Her Majesty’s Revenue and Customs (HMRC), the Department for Work and Pensions (DWP) and Her Majesty’s Courts and Tribunals Service (HMCTS) to study their debtors. The money owed by those who had debts with more than one department totalled £1.7billion. The individual amounts owed are often small and costly to recover but by aggregating them collection could become far more cost effective. This autumn HMRC and DWP will pilot a co-ordinated debt collection for those over lapping debtors.

The Fraud, Error and Debt Taskforce is Chaired by Francis Maude, Minister for the Cabinet Office and includes: David Gauke, Exchequer Secretary to the Treasury; Lord Freud, Minister for Welfare Reform. It was established in October 2010 to lead the first ever cross-government approach to tackling these issues.